Long-Term Effect Remains Uncertain

Long-Term Effect Remains Uncertain

Sue Pelletier

For an industry already in a slump, the economic fallout of the horrific events of September 11, and the subsequent declaration of war against terrorism by the U.S. government, has dealt a traumatic blow, at least in the short-term, to the meetings and hospitality industry.

“Organizations are still examining the need for travel,” remarked Dan Gannett, business development manager, McGettigan Meetings Plus, at a hastily called travel industry meeting in San Francisco 11 days after the attacks. The travel outlook for the rest of 2001 is bleak, while 2002 looks healthier, he said.

Other panelists seconded that view: “If we are at war we can’t know how this will play out,” remarked Suzanne Parsons, vice president of conferences, Wells Fargo Bank. “Something else could happen tomorrow. That’s the reality.”

Industry associations, on the other hand, put forth a strong message of reassurance as we went to press with this issue. David Dubois, president and CEO of the Professional Conference Management Association, says his “guestimate” is that 75 to 80 percent of meetings and trade shows that were scheduled for the month of September were either canceled or postponed.

“Now a semblance of normality is starting to come back,” he says. “We’re encouraged that many associations are going on as planned, or rescheduling to give them time to retool and rebuild people’s sense of safety traveling.”

According to Steven Hacker, president, International Association of Exhibition Management, the 2001 Annual IAEM Meeting and Expo! Expo!, is going on as planned December 4 to 6 in Chicago. “We have had zero cancellations. We sold out the trade show, and have not gotten a single phone call from exhibitors wanting to make a change. That’s consistent with what I’m hearing from others in the industry.

“There’s a serious disconnect between reality and what the mainstream media is reporting,” he says, adding that the prior state of the economy also needs to be taken into account. “One has to ask what kind of condition events that canceled and did not reschedule were in before September 11.”

Ripple Effect

Nonetheless, fear of flying, airport shutdowns, and then cutback in air service caused hundreds of meetings, large and small, to be canceled in the months of September and October, prime season for convention business in many cities. The ripple effect of travel cutbacks sent occupancies plunging in hotels around the country.

Prior to September 11, PKF Consulting had projected a 3.5 percent decline in REVPAR for its sample cities for year-end 2001. “That decline would have been the greatest annual decline in REVPAR in our sample of major US cities in the past 40 years,” said John Fox, senior VP, in an announcement a few days after the national attacks. “To state the obvious, the industry will experience further declines in the near term.”

Airlines, reeling from huge losses from the curtailment of flights during the crisis and the later drop in air travel, received a $15 billion aid package from Congress at the end of September, and airlines announced substantial layoffs and cutbacks in air service. A bright spot: Both thc hotel and the airline industry came into 2001 with a couple years of record profits behind them.

What about associations and meeting organizers? Like everyone else, Conferon, the country’s largest independent meeting planning company (60 percent of its clients are associations), has been hit with cancellations in the aftermath of September 11. Within weeks, the company was down about $3.6 million in hotel rooms. About 50 to 60 percent of the canceled meetings will be rescheduled, but the impact on the industry long term will be substantial, especially if there is more terrorist activity, says CEO Bruce Harris.

Associations that depend on conference revenue may be damaged far worse than corporations, Harris believes. “There will be major changes in the landscape and a lot of companies may not survive. 9/11 will have a far greater impact than the recession.

For some sectors of the industry, however, there may be some good economic news: Analysts predict that companies selling event insurance will see a surge of business, as will videoconferencing suppliers.

However, it is far too early to tell what the long-term economic impact of September 11 will be. “The negative news out there just feeds on itself,” concludes Mary Power, president and CEO of the Convention Industry Council. “People say that because everyone else is canceling, maybe they should cancel too. But look at New York City: although most events planned for September and October were canceled, all but one were rescheduled before the end of the year.”

COPYRIGHT 2001 Adams Business Media

COPYRIGHT 2001 Gale Group